Does the Texas Code of Professional Responsibility permit lawyers to participate in a
program as established by the Supreme Court of Texas under Article XI of the State Bar
Rules which uses interest earned on funds held in lawyers' trust accounts for a short
period of time or which are nominal in amount to provide indigents with representation in
civil cases?

Discussion

Section 38 of Article X of the State Bar Rules requires that every lawyer engaged in
the practice of law in Texas shall maintain a separate trust account or accounts. Disciplinary Rule 9-102 of the Texas Code of Professional
Responsibility mandates that funds of clients be held separately from the lawyer's funds.
The rule specifies that the client funds be kept in one or more identifiable bank
accounts. It further provides that the attorney must maintain complete records of client
funds, render appropriate accounts to clients, and promptly pay to the client as requested
the funds which the client is entitled to receive.

Nothing in DR 9-102 requires lawyers to place clients' funds in interest bearing
accounts. Provided that arranging to earn interest on client funds does not impair
complete record keeping or prompt payment to clients, there is no disciplinary rule which
prevents lawyers from doing so. In fact, when client funds held by an attorney are capable
of earning interest, the funds should be placed at interest. The interest earned belongs
to the client (see Professional Ethics Committee Opinion 404,
1981). However, under the question before us where the amount of each client's funds and
the length of time they are held in trust accounts generally would not yield sufficient
interest to offset the expense, setting up separate accounts for each client is
impractical in these cases. If a single trust account is used and clients' funds are
commingled, even if this were permitted by current banking regulations, the attorney would
not be entitled to the interest since doing so would constitute an impermissible benefit
from the client funds, Professional Ethics Committee Opinion 404 (1982). Calculating and
distributing the interest on each client's funds when commingled with the funds of other
clients would be impractical. Therefore, lawyers at present have no choice but to deposit
client funds, nominal in amount or held for brief periods of time, in accounts which pay
no interest. Only banks have benefited from such an arrangement.

The Texas Equal Access to Justice Program, established by Article XI of the State Bar
Rules, offers a public service alternative to the present system which, in effect, gives
to banks the benefit of these commingled client funds. Article XI provides that attorneys
may deposit all client funds which are nominal in amount or reasonably anticipated to be
held for a short period of time into a single interest-bearing demand account. State Bar
Rules Article XI, § 5. The financial institution in which the account is maintained shall
remit the interest directly to a non-profit corporation whose purpose is to use those
funds to obtain legal services to the indigent in civil matters. State Bar Rules, Art. XI,
§§ 4 and 6.

Such a program does not impede fulfillment of the DR
9-102 requirements for maintaining client funds separately from lawyer funds, complete
record keeping, rendering accounts to clients and ready access to client funds. It also
furthers the worthwhile goal of furnishing legal services to those unable to pay. EC 2-16 and EC 2-25.
The only question which remains is whether, in permitting the interest earned on client
funds to be paid to the Texas Equal Access to Justice Foundation attorneys are violating
DR 9-102(B)(4) which provides that they must pay to clients all the funds to which they
are entitled.

As a matter of constitutional law, it has been held that clients do not have a property
right in the interest earned on the above-mentioned types of client funds. Petition of
New Hampshire Bar Ass'n, 453 A.2d 1258 (N.H. 1982); Petition of Minn. State Bar
Ass'n, 332 N.W.2d 151 (Minn. 1982); In re Interest on Trust Accounts, 402 So.2d
389, 396 (Fla. 1981). The Internal Revenue Service has ruled that such interest is not
includable in clients' gross income. Revenue Ruling 81-209, 1981-2 Cumulative Bulletin 16.
The ABA Committee on Ethics and Professional Responsibility has considered the ethical
acceptability of programs similar to the one established by Article XI of the State Bar
Rules. In ABA Formal Opinion 348 (1982) the Committee concluded that the same rationale
employed in the constitutional and tax law contexts was applicable to the ethical
question. The opinion states:

The client has no right under the circumstances to require the payment of any interest
on the funds to himself or herself because the amount of interest which the funds could
earn is likely to be less than the appropriate charges for administering the earnings. The
practical effect of implementing these programs is to shift a part of the economic benefit
from depository institutions to tax-exempt organizations. There is no economic injury to
any client. The program creates income where there was none before. For these reasons, the
interest is not client funds in the ethical sense any more than the interest is client
property in the constitutional sense or client income in the tax law sense. Therefore,
assuming that either a court or a legislature has authorized a program with the attributes
described above and thus, either implicitly or explicitly, has made a determination that
the interest earned is not the clients' property, participation in the program by lawyers
is ethical.

We note that the creation of the program in Texas by Supreme Court rule constitutes an
implicit determination that the interest earned is not the clients' property. Since the
clients have no right to the interest, there is no duty to notify clients or obtain their
consent to take part in the program.

Conclusion

The committee finds that participation in the program by Texas attorneys does not
violate the Texas Code of Professional Responsibility. (9-0)